Abstract: After becoming a member of the WTO (World Trade Organisation) in 2001, the Chinese banking industry witnessed a huge transformation with foreign banks establishing their operations in the country. These banks were allowed to offer all types of renminbi (RMB) businesses to the customers in China. But the foreign investors faced huge operational and regulatory constraints in the Chinese market. They were at a disadvantage due to a lack of branch networks, especially in consumer banking. Although the state-owned commercial banks (SOCBs) were encouraged to invite investors from abroad, ownership of foreign banks was restricted to 20% in local banks. Moreover, foreign investment in a local bank was capped at 25%. This regulation was imposed to enable the foreign banks to participate, but not dominate the Chinese market. As a result, foreign banks were expected to remain focused on current business areas like loan syndication for large projects, investment banking, treasury products and wealth management. With all the above restrictions in operation, it may not be possible for foreign investors to quickly gain a large market share in China and dominate the local banks.

Pedagogical Objectives:

To analyse the changes that took place in the Chinese banking sector after the country's entry into the WTO in 2001.

To analyse the operational challenges faced by foreign banks in the Chinese market.

To study whether foreign banks can be successful in the Chinese market in future.